[Kerala Local Authorities Entertainment Tax Act] Entertainment Tax Cannot Be Levied On Unsold Concert Tickets: High Court

Justice Gopinath P. stated that entertainment tax could only be charged under Section 3 of the Kerala Local Authorities Entertainment Tax Act, 1961 towards sold tickets and not on unsold tickets. The Court said:

“The learned counsel for the petitioner is also right in contending that the tax could be imposed or collected only by authority of law and since he provisions of the charging section in the 1961 Act clearly indicate that the entertainment tax as per 1961 Act could be levied only on the number of tickets that had actually been sold, any other appropriation of the amounts paid as tax would fall foul of Art.265 of the Constitution of India.”

The petitioner, Jose Thomas Performing Arts Center (JTPAC) is a performance arts center that conducts various events. It conducted a music concert within the jurisdiction of Maradu Municipality.

The petitioner paid entertainment tax to the Municipality as per Kerala Local Authorities Entertainment Tax Act, 1961 and Kerala Local Authorities Entertainment Tax Rules, 1962.

The petitioner remitted an entertainment tax of Rs 1,24,080, Service Cess of Rs 3102 and a security deposit of Rs 50,000 for 1020 tickets with the Municipality. Each ticket was to be sold at Rs 600, however, only 265 tickets were sold out of 1020 tickets and the balance of 755 tickets remained unsold.

The petitioner returned the unsold tickets to the Municipality and requested for refund of the security deposit and the advance entertainment tax paid on 755 unsold tickets. The Municipality refunded the security deposit but did not return the amount of entertainment tax paid on the 755 unsold tickets. The Municipality informed their decision to transfer the entertainment tax paid on unsold tickets to the Chairperson's Distress Relief Fund.

The Council of the Municipality dismissed the appeal filed by the petitioner challenging the above decision. Aggrieved by this, the petitioner has approached the High Court.

The Counsel for the petitioner contended that entertainment tax could only be levied on tickets that had been sold and they were entitled to claim a refund of entertainment tax paid on unsold tickets by relying upon the Full Bench decision in Municipal Council, Kottayam v. K. Mahadeva Iyer (1970). It was also stated that the Municipality has no authority to transfer entertainment tax paid for unsold tickets to the Chairperson's Distress Relief Fund as per Article 265 of the Constitution. Article 265 states that no authority shall collect or levy tax except by the authority of law.

On the other hand, the Counsel appearing for Municipality contended that the petitioner had no statutory right to claim refund on amounts remitted towards entertainment tax.

The Court referred to Section 3 of the Kerala Local Authorities Entertainment Tax Act. Section 3 pertains to the right of Municipality to levy entertainment tax for admission to any entertainment.

The Court stated that the term 'admission' as defined under Section 2 (1) and (2) of the Act would mean that entertainment tax was payable on admission to the place of entertainment for amusement as a spectator or as an audience.

“ The definitions of 'admission' and 'admission to an entertainment' as contained in sub sections (1) and (2) of Section 2 r/w provisions of Section 3 of the 1961 Act indicate that tax was payable on an 'admission' and the petitioner was entitled to refund of the entertainment tax paid on the unsold tickets,” it said.

Relying upon Rule 19 of the 1962 Rules and Municipal Council, Kottayam (supra), it was stated that refund of entertainment tax was permissible on unsold, unused entertainment tax stamps. Further, the Court stated that the Municipality has no authority to transfer entertainment tax paid on unsold tickets to Chairperon's Distress Relief Fund.

As such, the Court directed the Municipality to refund the entertainment tax on the unsold tickets to the petitioner, after deducting rupees ten thousand that he paid towards the Chairperson's Distress Relief Fund.

Counsel for Petitioner: Advocates K.I.MAYANKUTTY MATHER, R.JAIKRISHNA

Counsel for Respondents: Standing Counsel T R Rajan

Citation: 2024 LiveLaw (Ker) 390

Case Title: JTPAC v Maradu Municipality

Case Number: WP(C) NO. 31296 OF 2017

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